346. Estate Planning Coordination: How Your Attorney, CPA, & Financial Advisor Work Together

For an estate plan to work in real life, your legal documents, account titles, beneficiary designations, tax strategy, and broader financial plan all need to align. That is why coordination between your estate planning attorney, CPA, and financial advisor matters.

In this episode of the A Wiser Retirement® Podcast, Senior Financial Advisor Shawna Theriault, CFP®, CPA, CDFA® sits down with Estate Planning Attorney Arun Gupta of AG Law, and Jordan Gary, CPA of Jones & Kolb to talk about why estate planning isn't a solo effort, and what happens when your professional team actually works together. 

Related Podcast Episodes: 

Ep 314. The Simple Estate Planning Error That Could Hurt Your Family

Ep 329. Digital Estate Planning: What Happens to Your Online Life?

Related Financial Education Videos:

Using an Online Estate Planning Service vs Using a Local Attorney

Prevent Family Conflict with Legacy Planning

Other Links:

AG Law

Jones and Kolb

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Transcript

Why Estate Plans Fail In Practice

SPEAKER_02 0:00

A well-drafted estate plan can still fall short if your accounts, taxes, beneficiary, and financial plan are not aligned. Today we're discussing how your attorney, CPA, and financial advisor work together to help make sure your plan works in real life.

SPEAKER_01 0:14

Welcome to a Wiser Retirement Podcast, where we cut through the noise and bring you real, honest conversations about investing, retirement, and building lasting wealth. No sales pitches, no gimmicks. Just insights to help you stop guessing and start planning your financial future.

SPEAKER_02 0:33

Welcome to Wiser Retirement Podcast. I'm Shauna Therrialt, and today I'm joined by estate planning attorney Erin Gupta and Jordan Gary, CPA, with Jones and Cobb to discuss how when it comes to estate planning, your attorney, CPA, and financial advisor need all work together. So this is really exciting. We've never had you here. Oh, thank you. And we're actually, we're actually talking about before, like I think this is the first time we met in person. It is. It's like crazy. And like we've working together for like a year and a half and and all of that. And obviously, Erin, you know, you and I know it. So this is all the first time we're together. So this is great. So hopefully we can do this, you know, more more than once a year. That would be great.

SPEAKER_04 1:10

Nice to meet you, Jordan. It's nice to meet you as well.

SPEAKER_02 1:13

Well, today, you know, it's really important. We always talk about how I'm really excited about because we always talk about how we have, you know, different teams and we have different layers and actually bringing us together to be able to talk about, you know, estate planning together, how it is not only for like the financial advisor, you know, we always talk about being kind of the quarterback when and we bring in the experts when we need it. And

Meet The Attorney And CPA

SPEAKER_02 1:35

so, you know, bringing in you, Arun, to do the documents and look at the structure. And then of course, you to talk about Jordan, to talk about the taxes and any tax planning there. And so it's really exciting to just be sitting here in the room with all of you, both of you today, and and actually doing that. So um, because a lot of times clients, I don't think they see what we actually do. So it's like, you know, we talk about it, but it's like when we bring you in or you in and, you know, they go and talk to you, we do truly work as a team. So it's it's really great. Um so really why estate planning requires a team. And so it's like usually the way that it starts, and it can start in multiple different ways, but the way it typically starts is like, you know, we're we're doing a full financial plan and we're just doing a full review of their situation. And maybe clients don't have an estate plan yet, meaning they don't have the documents or what have you, or maybe they do and they're outdated, or maybe they're they're okay, they just need to be reviewed. And so what typically happens um, you know, is we we review this and we say, okay, you know, we we see, and we're not, we're not attorneys, you know, and I I am a CPA, but I did, I got my CPA, I've talked about this before, just to understand the recommendations that I'm making because it's so impacted, taxes impact it so much. And so, but I don't prepare, you know, I always want your blessing on things. So I'm not making the decisions on your behalf. I'm kind of saying, here's what I think, but you know, reach out to Jordan and make sure it looks okay. So you're still the driver and this, you know, the driving seat of that. And so, um, but it helps that we're all cohesive. And typically what it looks like is, you know, I look at an estate plan and you know, maybe it needs to be updated, or maybe there's holes, or maybe we've identified something because you've been so good at teaching us, you know, what we need to look for in holes. Um, and and you know, and then understanding the tax consequences too. So I may look at, you know, a plan and say, well, maybe they don't have an estate tax problem now, but based on projections, they're going to. So how can we get ahead of that? So there's so many things that come up, or maybe they want to do gifting and it changes. And so that's where we have to pull, you know, it it's the advisor is knowledgeable enough in all the subject areas, if you will, not the expert at every subject necessarily, um, depending on experience and things, but it's almost like, you know, we bring in the experts at that point when we see issues, you know, and um I don't know, it's just really exciting. And so, you know, you draft the legal documents and help ensure the estate plan. And then the CPA, you're looking at tax considerations and, you know, what we should be thinking about and things like that. And so, from your professional perspective, when you

What Estate Planning Documents Do

SPEAKER_02 4:20

say someone, you know, needs an estate plan, what does that mean from your perspective?

SPEAKER_04 4:25

Uh well, usually when someone says they need an estate plan to me, um, it means they need a set of documents that uh control the disposition of their assets when they pass away. And that's usually through a will. Um, I also draft uh revocable trusts for my clients. And then there's also the corresponding financial power of attorney and advanced director for healthcare. Those are for those are for while you're living. Usually that's what um people think of when they think of estate planning documents. And when a client comes to me, usually I'm either going to create those or update those. But then there's several, several other related documents that are gonna come up in conversations. Um, and that's when those conversations come up, financial advisors, CPAs, it's already a signal that hey, it's it's good to just get everyone looped in. Um, even if it's just a basic thing like, hey, can you send me an intro email just so I have that person's contact?

SPEAKER_02 5:20

Yeah.

SPEAKER_04 5:21

Uh, because it's helpful down the road. Um and again, we're all on the same team, right? So uh and when you when you talked about working together for a long time and I read this um, you know, this podcast topic, it just brought me back to the days of we're behind the scenes just having these deep conversations about all kinds of things about a client's financial plan, their taxes, their investments. And we're doing all of this work, and we will, you know, give a client a a recommendation um for something, and there's so much that goes into it. Totally. So much that goes into it.

SPEAKER_02 5:55

Completely. And we may have had so much conversation, and it's like, you know, but we've put our heads together and done it, and I love that. And they don't they don't see the nuts and bolts of us actually working together, but that's really what's happening. So, Jordan, from your perspective, when you know, and maybe

Defining Goals And Asset Inventory

SPEAKER_02 6:10

you come at it a different way. If someone needs an estate plan or you see an issue, you know, what what does that mean from your professional perspective, would you say?

SPEAKER_05 6:18

Well, the first thing I think is that uh it's a deeper conversation. We need to understand what the goals are, yeah, what the assets are that we're talking about. Uh, you know, it's um it's really just getting that plan, seeing where they want to go and and how much estate planning do they need. I think everyone needs estate planning to a certain extent. Yeah. Uh for some people, it's just more involved than others, depending on you know what they have, what uh what you know, where they want things to go. And uh, you know, if they're looking for uh, you know, I don't know if it's just tax uh mitigation or is it uh you know, is it multi-generational, is it legacy planning? Yeah. Uh so it's really just having a deeper discussion, finding out, you know, where they want to go with their estate and uh and and helping them achieve those goals uh you know through uh you know and through these partnerships uh between financial advisors and then and estate planning return attorneys and and and with me as a as a CPA.

SPEAKER_02 7:08

Yeah. I mean, do you ever see, you know, do you ever see, and I know obviously, you know, we refer clients, do we work with clients in the same? Do you ever see just things come up with clients? Because I I feel like, you know, having the CPA designation, I feel like I feel like clients have looked at me differently because they always see the CPA as their advisor. You know, so so it's like it's almost a new since I've been in the industry 29 years, it was it was almost like, well, I have a CPA, I don't need an advisor, you know. So now it's like it's almost like a dual role, but I still feel like they see the CPA as a really large advisor to them. And so do they come to you to talk about these estate planning needs and then do you refer them to an advisor or how do you handle that?

SPEAKER_05 7:50

Absolutely. So you know, the questions, like I said, they they go from one end of the spectrum to the other. So they can be simple questions that can be more involved. Uh, you know, one thing for me is that um is that we just want to make sure that their their goals are achieved. So, you know, is it is it um is it tax that they're looking for? Or is it is it um, you know, is it just you know getting out of probate? You know, I mean, is a is a is it just a will that they need or is it or is it uh is it trust that they need? You know, what what is what is the goal? Yeah. And uh as far as the questions that come to me, um, you know, I've seen people um sometimes it's uh when you have a married couple, it's sometimes just one spouse handles everything, right? Uh they handle all the financial assets. And if there's not good if there's if they haven't planned very well, then if they predecease their spouse, then then their their the remaining spouse can uh can be really overwhelmed by it all. Um and I've been involved in estate uh planning situations or you know after a after someone's passed away where if it hadn't been for the team that the the decedent had set up, then the spouse would just have been completely lost. Uh so uh so it's it's beneficial to have uh the you know to have a plan in place uh and communication of that plan uh is very important as well.

SPEAKER_02 9:07

Yeah, absolutely. Because yeah, you know, and talking about which each professional actually does. And so, you know, I think there's a lot of overlap with what we do, but then there's still individual roles that we play in the relationship. And so, you know, um you know, as far as an advisor is concerned when it comes to an estate plan, you know, we help set up accounts, you know, through the custodian. Um, we help, you know, invest those accounts. Um, you know, we may talk about things like helping to add a beneficiary, of course, with like your blessing as the estate planning attorney, if you put together, you know, documents and then you say how should the beneficiaries be? But then also, you know, from from your perspective, you know, what role do you play? And it could be while they're alive, you know, d deceased, what have you, what role do you think you play or what role do you play with

Taxes People Get Wrong On Inheritance

SPEAKER_02 10:00

estate plans in general?

SPEAKER_05 10:01

Well, naturally from from you know, my profession, it's it's really is taxes, right? I mean, that's that's where it's easy for me as a CPA to just come from the tax role and and try to mitigate taxes, um, you know, whether that's through um you know, through beneficiaries, through giving, uh, making sure people understand the implications of the types of of assets they may be inheriting. Um, most people uh they don't know, you know, what what the tax implications are uh when they receive an inheritance, no matter what size. I mean, you know, some people think if they inherit just cash that they have some type of a tax, and that's not the case. That's right. Um, you know, and um, you know, homes are a big deal. Like a lot of people ask me, oh, I just inherited a home. You know, what you know, how are the taxes going to affect me? And the chances are if you if you turn around and sell it really quickly, it it may not be an impact to you at all tax-wise. So um, so it's really um, you know, from my point of view, it's tax mitigation. A lot of that comes into um, you know, speaking with uh the the um the taxpayer from my case about about uh you know their basis, uh step up is and basis versus what happens when you pass and someone uh inherits inherits for the step up versus gifting. I mean that's that one's huge. It is people don't um and what I would like to see is people actually come to us before they make a decision on something so that we can help them navigate. Uh, you know, because uh I've seen it before. We've had a situation where uh someone uh had gifted a home before they passed, and then they passed um right after that, and uh, and then so the beneficiaries received a gift and they received inheritance, but the tax implications are completely different.

SPEAKER_02 11:39

Totally. And it's so funny you should mention that. And I love that. That just goes to show because you and I just did a show on that, right? We actually used that example where it's like, you know, clients try to make it easier. So it's like, I'm gonna make it easier to just pass to you. So I'm just gonna put this account in your name, or I'm gonna gift this house to you now, or I'm gonna do whatever just to make it simpler. But first of all, there's gifting issues with that because you're you're going over the 19,000 gift limit, right? So there's just gift issue, gifting issues, but also that step up in cost basis, you just lost that. Absolutely. And so it's like uh there's so many implications there. And so that's that's like evidence right there that this all crosses over because not only are they talking to us about it where we're trying to find these issues and hopefully they call us and say, hey, I'm thinking about this, but you're right, they don't always do that. And so, you know, it's sometimes we get it after the fact, just like you do. And we're we're trying to coach them into the same, you know, there's m multiple ways to do things, but you know, if they would come to us first and come to your planning team, all three perspectives, that is going to be so much more helpful for them so that they don't make these time that's a huge mistake that could have been prevented very easily, you know, where it could save them a lot of tax. And so from your perspective, you know, what is the most common misconception that people have about estate planning attorney, what an estate planning attorney does?

SPEAKER_04 13:05

Well, you know, I I think that uh when it comes to make they ask me questions that I have to kind of step away a little bit and tell them, listen, I can I can give you some advice on this, but that's not my expertise. So I'll defer to um I'll defer to a financial advisor or I'll defer it to an accountant. I can speak generally just like well, you you are a CPA. I'm I'm I'm neither I have no designations, financial or tax, but because it's all so related naturally, we just know a lot about all of these industries.

SPEAKER_02 13:35

Well, an estate planning attorney has to understand the estate plan limits and all, right? Yes, of course. Because you have to be able to do the exemptions and the trusts and the you know, okay.

SPEAKER_04 13:45

When it comes to, I'll just give you an example, um gift reporting, right? I'm not working with the IRS every day. If you're uh if you make a large gift that is over the exemption, let's say it's a $20,000 gift, right? And $19,000 is the limit, I'm guessing that the IRS is probably not going to go after that $1,000 over the gift limit, right? However, I can't confidently tell them, I will tell them my advice is to do what's right, report it, use your lifetime exemption. However, I will defer to an accountant, to you know, someone that files taxes, maybe for them also, knowing that, hey, how does this all work in practice, in reality? Those kind of situations I like to defer a little bit more to to uh financial advisors or or CPAs for the for the taxes for the CPAs. And then I get questions about um basis and the and and and which stocks should they and I I tell them again, listen, I can give you general advice, but I think you should speak with your financial advisor. And then it's always good for us to all know who the other person is, whether it is knowing them very well or just knowing their name. I think it's always a good idea to have contact information.

SPEAKER_02 14:53

Yeah, because really legally, we're not supposed to give legal advice. You can do that. You're not supposed to give tax advice, we can do that, but really I'm not signing the tax return. You are. So it's like the collaboration is huge. Um, and having that team that works together. And I know, you know, in this industry, I've had so many clients tell me it's like they they get frustrated in general, where it's like they have an advisor and then they have a separate CPA and then they have an is and none of them are talking. And I love, you know, the collaboration that we get to do to be able to do it together, you know, so that we are all talking and all of that. And so it makes it more seamless for the client too. If you work not every

Estate Tax Returns And Portability Basics

SPEAKER_02 15:30

firm has that where, you know, we work together. Um, hopefully firms do, but not all of them do. Um, so I have a question that is kind of off script, but I'm just curious because I've seen some situations where you have some estate planning attorneys and some CPAs that will file like the death taxes. So, so it's not is it a it's not the 1041, right? So it's it's more of the state tax is that they're gonna be able to do that.

SPEAKER_04 16:01

Okay, so so how now from my experience, I file I filed 706s for for for clients before CPAs can file 706s for, but not not every CPA uh from my experience does many of them or wants to touch that and they will just say, Hey, you do it? I'm fine doing it. That's basically I do 706s, which is a uh federal uh only if is that only if they're a taxable estate?

SPEAKER_02 16:28

Or if you're doing portability too.

SPEAKER_04 16:30

Yes. Uh so um lately the the ones that I'm filing are to get the deceased spouse's unused exemption. So if you are under the exemption, meaning the 15 million under the $15 million exemption, um, you're not there's no estate tax owed. However, if you file uh an estate tax return for the sole purpose of if you're under the exemption, whatever you're under, you you you pass that along to your spouse so they get a bonus.

SPEAKER_02 16:57

That's usually the the So in other words, if your estate is 10 million, your exemption is 15 million, then you use 10 of it, you have five left. You can then it's portability. So then it goes to your spouse. So you file a 706 to do that. Yes. Okay.

SPEAKER_04 17:13

But I I'll do that for large estates or um where you're even though you're not there, the the spouse could be later, and that little bonus helps, and you've got five years to do it. So after someone passes away, five years to file the seven to five to get that. Yeah. So even if you don't realize this for a few years, that's good to know. There, there can still there can still be time. Now, CPAs, I I again, I I think it just depends on the CPA, right? Some are probably more comfortable doing it, and some may just defer to an attorney to do it. I don't really know um how it all works.

SPEAKER_02 17:48

How do you do you all defile the 706s or we do? Yeah, we do file some of the things. Okay. That's so interesting. So I've I've never, I was like, that seems like see, there's like the crossover there is so interesting to me.

SPEAKER_04 17:58

As as I've done them, and I started bare bone, I didn't, you know, um I've I have no real um uh tax professional tax background, right? So I'm I'm I'm going into this and it's a lot of information gathering, right? And CPAs, I as I've done as I've done them, I can just tell if you've done this enough times, you can just automatically just go, go, go, go, go. And I I'm sure a CPA is I I feel like many of them are are more trained than they think they are to do a 706. Um, I think there's some there, I mean there are well, there are the ones filing like the trust tax returns too, right? And there are some like like titling issues? There's some there's some c complicated elections that that that you that you you need to make deep deeper into these 706s, which which may, I think, give some some CPAs some pause. But aside from that, I think it's pretty much it's information gathering. That's at least that's at least from my experience. Good, good, good question.

SPEAKER_02 18:55

I don't know. I was just curious because it's like I've heard, you know, I've seen it go both ways. And you know, I am a CPA, but I'm not preparing I'm not in, you know, preparing the tax turns every day. I I I like I said I got my designation, so I would understand when I'm doing a Roth conversion or I'm running a tax projection or I'm making a recommendation, like I would understand how the impact is. Otherwise, I feel like I'm driving blind if I'm making a recommendation. And so, but I'm not in, I don't do the daily what you do, you know. So it's just interesting to me.

SPEAKER_05 19:22

Yeah, we I mean we file 706 as uh we file more for portability uh than uh these days than we do for uh taxable estates. Uh but it you know that's because the exemption is like I said, $15 million. Yeah. And then with portability, you get you know $30 million exemption if none of it was used uh prior to uh prior to the um the death of the decedent. But um but as far as uh you know it's you may not have an estate problem now, but as we as you mentioned, Arun, it's you may have one in the future. Uh, you know, a a $10 million account, if you don't dive into it, it can grow significantly. Uh, you know, home values, if you have multiple homes and home values, you know, they can go up and they can they can put you there pretty quickly. Uh, you know, we've been fortunate during my career so far that the uh the exemptions pretty much went up every you know every year. So uh, you know, it's it's grown significantly.

SPEAKER_02 20:13

I think when I started it was like 500,000 and then it went to a million and then two million. You know, I remember it's just been going up, but now it's so high that most Americans don't have that kind of money. But you know, with the wealth transfer happening with the baby boomers, and I'm seeing more of that now. So, you know, the wealth transfers happening, and so you have, you know, unfortunately, people passing away and then they're leaving money to people who have already made money. And so I can I see it compounding. And then you're just when we run projections, you can see what it grows to.

SPEAKER_05 20:41

You know, these are things that that we don't there are things that we don't control. You know, a lot of times Congress controls, you know, things. Uh so you know, they uh recently we had the the most recent tax laws, and that that made the exemption uh permanent for now. Whereas there were a few years there we were speculating that that it could pretty much be cut in half.

SPEAKER_02 20:58

And so it's but we all know what permanent means.

SPEAKER_05 21:00

Yeah, like let's come on.

SPEAKER_04 21:01

It's fine that they say it's made permanent until they change their minds.

SPEAKER_02 21:05

It's permanent meaning it's not gonna sunset somewhere in some you know current tax law, but we all know that permanent means it for right this sec for this year.

SPEAKER_05 21:14

That's right. That's right.

SPEAKER_02 21:16

Until something else changes, but yeah, I hear you. I hear you.

SPEAKER_03 21:20

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Coordination Problems That Break Plans

SPEAKER_02 21:40

I I feel like the coordination is really important, like we've talked about. And I think I I feel like estate planning really breaks down when we're not coordinating. Cause it's like, okay, you know, it if I'm sitting here, like, for example, if we're we're talking about charitable giving, um, you know, like for example, I like to look at if a client is Charitably inclined, can they do it from their RMD, the required minimum distribution, or can they gift appreciated securities or, you know, what have you? Sometimes we have to understand what's on the tax return to understand if they're actually going to get the benefit of the deduction or if they're just terribly inclined. You know, we have to understand the movements of what's happening in your world, but also vice versa in our world. And I don't mean it's like it's all the same thing because you sometimes accountants, I think this is me, you know, are looking at the information that's going into the tax return. Of course, you're talking to your clients. Um, of course, you're, you know, talking about their situation, but sometimes you don't I feel like maybe you don't have a full picture of the whole plan and the assets that are in it to be able to say, well, maybe you should gift appreciated securities here, or maybe you should do this here, you know. And so that's where I feel like estate plans can really break down if we're not all working together. Because, you know, if I if I'm advising on a type of allocation or I know where they're withdrawing money from, but then you're looking at the tax ramifications, but then what is the long-term effect of the estate plan? I I just feel like if we all work in silos, it can really just cause issues.

SPEAKER_04 23:16

I completely agree. And I think the a very basic one of those is how your beneficiaries are listed, right? I can do a fancy estate plan, but if you're if you're if you're if you have beneficiaries that say something else and the majority of your assets are in those accounts, that's gonna trump the design. And a lot of times clients are busy, they've got a lot on their plate. They don't want to dive into all of this, you know. And then I'll I'll ask clients what kind of accounts do you have? Sometimes they don't even they don't even know. They don't even know brokerage, Roth, they may not even know. It's just a retirement account to them. And I'm not I'm not criticizing a client. No, because it's confusing unless you're trained in this stuff. It's very confusing, but just knowing that someone that is very wealthy and sharp doesn't know that, right? They're leaning on you completely for this advice. So the the it you have to coordinate. You have to coordinate and just make sure because reality is different than the few hours that you spend talking to them, right? And and to, you know, for them to get the benefit of uh what you draft what I draft or you know, my advice, uh it has to, it has to be coordinated.

SPEAKER_02 24:22

Mm-hmm. Absolutely. What what have you seen any issues where, you know, what tax issues have you seen where maybe a recommendation was made or not made, and you know, because you were working in a silo or the advisor or a state planning attorney was working in a silo, and so it caused an issue.

Smarter Charitable Giving With Tax Strategy

SPEAKER_02 24:40

Can you think of anything like that?

SPEAKER_05 24:41

Uh one that comes off the top of my head is you you kind of hit on a little bit when you talked about giving uh a qualified charitable distribution from an RMD versus appreciated stock. Both of them are very valid giving strategies. Uh, but uh, you know, in today's uh, you know, with with the standard deduction being as high as it is, if someone has no other itemized deductions and they gave $100,000 of appreciated stock, well, they just took a haircut of the standard deduction of $30 some odd thousand dollars. Whereas if they gave from their RMD, they'd get the full $100,000 of tax benefit. It wouldn't be taxable. So that's just kind of one that where if if you know, if we're not communicating, uh, you know, if the financial advisor doesn't know whether the the taxpayer or the client is is taking the standard deduction or itemized deductions, they may just look at it and say, oh, you can, you know, you can give $100,000 of stock, but it may not be in their best interest to do it that way. Yeah. Um that that's just you know one example.

SPEAKER_02 25:36

And that's so interesting because, you know, we're talking about like capital gains property, which giving stock. So that's already has a tax preferential anyway for a long-term capital gain, if they were to sell it. And sometimes that makes sense because if you're not 70 and a half, which the required minimum distribution age has changed, but you you have to be at least 70 and a half to do a QCD. And so even if your RMD ages later, you can do it at 70 and a half. And so if you're if you're charitably inclined and you're doing it for tax purposes or not, even that is such a great point because you have that standard deduction. So if you were to give $20,000 of appreciated securities and your standard deduction is over 30, you didn't really get the benefit of the deduction. Because you already have it anyway. That's right. Right. So, but if you were to take that from, say, your IRA distribution or an IRA distribution if you're 70 and a half, then that just you don't get the deduction, but you avoid the income completely and it comes out of your IRA essentially for free. Right? Yeah, absolutely. Is that how you would say that? Sort of sort of just avoid the income on it.

SPEAKER_05 26:39

Yeah, you well, you don't pay tax on the distribution that you that it goes straight to charity. So that's the important part.

SPEAKER_02 26:44

Make sure it goes straight to the don't take it and then write a check, because that's not the same thing.

SPEAKER_05 26:48

That's right. That that's about the worst that you could do.

SPEAKER_02 26:50

But uh, you know, but another aspect of it because then you pay the tax and then you still don't get the benefit of the deduction because it's below the require below the 30,000, right?

SPEAKER_05 26:59

But also something to keep in mind too, it's once again, it's working in conjunction with the with the team is that if you if you do a QCD, if you give from your IRA, you know, that money was going to be taxed at at whatever the tax bracket of your tax bracket, or if you pass away, then your beneficiary's tax bracket. But if you if you donate the appreciated stock, um then you've you've lost that step up and basis, right? So so you know, the option is if you if you can deplete the IRA before you give the the appreciated stock, and that's not gonna be it's not gonna be the best case for everyone, but in a lot of cases it's the better idea because the the beneficiaries are gonna get that step up and basis of stock, so then they won't have the tax it, they won't even have the the 20, 20 or 15 or whatever it may be.

SPEAKER_02 27:42

On the capital gains, right. So the thank you for validating that because that's what what I usually recommend. Um, you know, is if I'm if we're looking at a state plan, and I think you agree with this, and if you don't, that's fine. You could tell me you don't, but it's like when I'm looking at a state plan and it's like, okay, if you want to give some to charity, I prefer to give it not from a Roth, but I prefer to give it from a traditional IRA or 401k because the charity doesn't pay the tax, then they're not doing an inherited IRA distribution. Your, your, your heirs aren't. And then they get more of those taxable assets, meaning like brokerage assets, house, cash accounts, whatever. And if there are embedded unrealized gains, such as the house or the brokerage account, then they get that stuff up in cost basis, which essentially wipes out those gains. And then they don't have the ordinary income of the IRA.

SPEAKER_04 28:34

My general recommendation is if give your beneficiaries uh give the charities from from the retirement account. If you can do that, do it. So your beneficiaries have to pay less income to the case.

SPEAKER_02 28:47

Because a lot of people put it in their will, and then that's not doing the same thing we're talking about.

SPEAKER_04 28:50

Exactly. Uh do it from your it depends. If you have a revocable trust, it's a little bit easier to do it because you can you can you can get as customizable as you want within the actual trust.

SPEAKER_02 29:00

And not having to name all the beneficiaries, you can just say my trust, and then it makes it simple, and then you do the fancy wording in there.

SPEAKER_04 29:07

Correct. And if you and if you don't have a trust and you have a will and you're trying to make that, you know, that that charitable bequest, I probably wouldn't do it in the will. I would specifically from, and again, it it's all gonna depend because it's gonna it's gonna change in value, but if you can make that designation through your IRA, in a sense, you know, the your your beneficiaries would be getting a larger piece of the non-taxable pie. But there's there's a lot that even you two just started talking about that I was starting to listen to it, and I'm like, oh man, I didn't think about I didn't I didn't think about this part of it and that part of it, and that's how this works, right? Right. We lean on we lean on uh uh you know the uh everyone else on the team to to help make those decisions too.

SPEAKER_02 29:47

Right. Because all of us bring like a different perspective of what we've seen and different trainings too.

SPEAKER_05 29:53

Well, it's important uh to mention you know that most people are not gonna be subject to estate tax. Okay. So so when you give out of your will, you're not getting any tax benefit from this. So so if you want to give As far as charity is concerned.

SPEAKER_02 30:08

Because if you have a taxable estate and you give to charity, it's a deduction for your state. But most people don't have $15 million in the world. That's what I'm saying.

SPEAKER_05 30:15

They're not gonna have a taxable estate. So when you give uh out of your your estate and you don't have a taxable estate, you're not getting tax benefit. Whereas if you give prior to passing, then you will get some tax benefit, which would leave um more for your beneficiaries, or could be uh could leave more.

SPEAKER_02 30:32

Yeah, absolutely, especially from those retirement assets. Um well, can you think of

Common Mistakes With Trusts And Beneficiaries

SPEAKER_02 30:40

you know, some common estate planning mistakes that are made with clients? Maybe, you know, is there one, is there one thing that stands out to each of you? I'm sure we see there's multiple ways to do things. And and you know, is there one thing that you have seen repeatedly that keeps happening with estate plans or having to do with any kind of inheritance or anything that comes to mind?

SPEAKER_05 31:04

Well, uh for me, you know, I've I've already hit on it a little bit, but that's that's gifting versus versus inheriting, you know, step up in basis versus taking the the basis of the the gift the person that gave the gift. Uh that that's kind of a big one. That's uh it's pretty common. Um, you know, I would say other things I've seen, it's not super common is to you know to understand your plan. So there there's multiple aspects to the plan. You create the plan, but then you also have to execute the plan and and uh and then also understand what the what you know what executing the plan means. So, you know, I've whether that means uh funding a trust, if you don't fund the trust, then it's not doing anything, yep. So so there's a there's a you know it's it's about creating the plan, uh knowing what it's going to do, and then following through with the plan. Because I've seen people create plans and then they start backtracking because that's not what they wanted to do, you know.

SPEAKER_02 31:58

So that's because they didn't understand it.

SPEAKER_05 32:00

I think that's been part of it. Yeah. Is that they didn't understand what they were doing. Uh, you know, maybe they heard something and they they thought it was what they needed to do, but then but then they they realized that well, that's not exactly you know what you needed to do, or or they didn't realize the the impact uh, you know, if the um, you know, just depending on there's there's so many things that we can you can't can't cover everything right now.

SPEAKER_02 32:20

But yeah, of course.

SPEAKER_04 32:21

I I I'm I'm I'm with you on that 100%. The the basic things like just check how your accounts are titled, just check your beneficiary designations. What do you have right now? You may discover that you did something 15 years ago that you had no idea about, but it's it's still valid. Uh and you it if things have changed, you need to make sure that that asset is designated in a different way, or that you don't even need there may be a trust that exists that you have that's no purpose anymore at all. Um, and just making sure that uh your plan is up to date. I think it's just checking in sometimes it doesn't even take more than 10 minutes, right? And you may discover something. Um, or have someone else check it and they may, you know, find a hole in there. Um so I think just making sure you're up to date with things.

SPEAKER_05 33:10

One example, sorry, no, go ahead. One example of that is uh is beneficiaries on your on your IRA account, right? So uh I have seen um unfortunately I've seen situations where there's been divorce. Oh yeah, you've gone through this. The beneficiary had not been updated. So the so an ex-spouse, maybe 20 years ago, was the beneficiary on an account. Yeah. Uh, you know, if we see someone on on the um a tax form that that is not a name that we're familiar with, sometimes we'll we'll ask our clients, hey, hey, is is this the correct beneficiary? Or is this, you know, we'll try to to point it out to them. So uh so we you know, we try to catch that. Uh we don't always get those forms when they don't have tax implications in the tax year, but when we see them, we definitely uh we'll speak about the beneficiaries. But that's one that can that can easily be overlooked. You know, you set something and you forget it, and and then it's not what you wanted when you're when you pass away or you know, um when that time comes.

SPEAKER_02 33:58

Isn't that crazy? All of us, so all of us are from different worlds, different firms, different, you know, backgrounds, and we've all seen that where people forget to remove their ex-spouse from a beneficiary, and it's like yikes. And there's nothing you can do. And there's nothing you can do. Like it's done.

SPEAKER_05 34:14

I haven't seen it personally with my work, but it's to make sure you name those secondary beneficiaries. I mean, you know, uh under the unforeseen circumstances that you um that a tragic event happens and you both go at the same time, then you want to make sure that you have those secondary beneficiaries in place.

SPEAKER_02 34:29

Good. I'm glad you talk about that with clients. I didn't realize that you all went that. I'm I'm glad you do bring that up and and you know, you know, go go deep with them in that. Um, I have a question that I've always wondered. So when there's a trust set up, like in a will, who does the gets the tax ID? Do you do that or do you do that? You're like, yes. It depends who they call first.

SPEAKER_04 34:54

But honestly, I tell them, listen, um uh we can we can obtain this quickly uh if you want to. I can I can I can yeah, I can I can help you out with it. We can do it quickly. Um because there's no like designated person that has to do it.

SPEAKER_02 35:06

I think they can actually do it themselves.

SPEAKER_04 35:08

I mean honestly. Sometimes I think they probably just should. Um it's a lot easier than people think it is. Um now if you you can you can apply online if you have someone with you advising you as you do it, uh that probably uh you know uh will help. Um but yes, you can you can obtain them basically instantly if you do it your if you do it yourself. Um if you if you are applying on behalf of somebody else, uh it takes uh that you can you submit it, they'll send it by mail. And with the IRS, um I think you probably know better than I do. Uh all bets are off as to when you can actually you may actually receive something in the mail from from the IRS.

SPEAKER_05 35:48

Yeah, the important thing when you apply for uh an EIN is that you you make sure you get it off your screen there. You make sure you print the confirmation, you get you get the IN because uh once you get past a certain screen, it's you can't go back and you don't have it. You don't you don't go back.

SPEAKER_04 36:01

Yep, everything is lost, every teeny little thing that you that you did. Um every time when I when I click that button, my heart skips a beat each time. And I'm like, please, please, please. And then and then it goes through.

SPEAKER_05 36:11

Yeah, no, I'll do screenshots. I do screen I'll do screenshots of uh of what I've keyed in and everything, and I you know I can do it all. But no, it's uh like CYA. Yeah, you don't you don't want uh you don't want to depend on on you know things getting to you in the mail. I mean for the most part it it it gets delivered and everything's fine, but who sends tax IDs or EINs in the mail anyway?

SPEAKER_02 36:29

Because then that's how identity theft identity theft happens, you know?

SPEAKER_05 36:33

It's a whole nother topic. Because you can't be like, I know, right?

SPEAKER_02 36:35

We can do so many topics on the show. I want I really want to do one on trust. We should do that. But I get I guess as far as gifting, I I just am curious what what tax issues do you think should be reviewed before assets are transferred or gifted?

SPEAKER_05 36:49

Uh well, I mean, definitely basis. I mean, you definitely want to look at basis to see you know what what situation you're ending in.

SPEAKER_02 36:55

And that's what they paid for. That's what they they you know, that's right.

SPEAKER_05 36:57

That's what's what they acquired it for, or in the event that um, you know, I've seen I've seen gifts happen over a you know multi-generational period. So we're a you know, a grandfather gave something to to their grandchild, so their grandchild's basis is what the grandfather paid for it, which could be next to nothing for for you know 50 acres of land somewhere. Um, but then when you know if that person gives it, then the basis is still the grandfather's basis. So tracking basis through those, through those gifts. Yeah, you know, you want to if if someone, especially if they're um, you know, late in life, toward the end of life, uh, you know, most of the time it's probably better off to uh when it's when it's an appreciated asset to to let someone inherit it to make sure that you you get the uh you know the beneficiary right, uh, you know, through whatever means it is, whether it's trust or or you know, specifically identifying who you want to receive something.

SPEAKER_02 37:50

I would say just so it gets that stuff up and cost-based. Absolutely. Yeah.

SPEAKER_05 37:53

And then another thing to keep in mind too is uh is you know, does the beneficiary want what you're what you're giving them? Okay, and I say that in the what uh if you have a say you have a lake home, you know, you say you have a you have a parent, they have two children, two adult children, and uh one of them lives in in California, and one of them's here in Georgia, and their lake home's here in Georgia, the person in California has no interest in it whatsoever. Well, do you want to to to work your planning out to where the the child here receives the home that they want, that lake home, they want it uh you know, to to to work it out in that way instead of instead of them splitting it 50-50.

SPEAKER_02 38:30

And then they have to buy a mouth and figure it out.

SPEAKER_04 38:32

That's the part I'm gonna echo that too, because if if you if you aren't completely clear, if you don't envision, well, what happens if they just don't want the same thing? That you have to plan for that. You have to play maybe maybe put a provision in there that says if you can't make a decision within 100 days, I'm gonna make the decision for you, and this is what happens to it. Even knowing that they'll probably work it out, but they don't always work it out, and when they don't, that is when things can get really ugly. Um, there's money involved, there's hurt feelings involved, emotions involved. And then I have to zoom out too beyond the just the legal landscape of it. And, you know, what do you want to move on with your life? How do you want to get better? Is it everything has a value to it, and it's hard to put a dollar figure with everything, but when things get really ugly, I mean it's really sad. And it could, it could, it can easily be avoided. Easily be avoided.

SPEAKER_02 39:25

Yeah.

SPEAKER_05 39:26

You know, another uh another one, you know, I use the the lake home as an example, but a a business. I mean, does the beneficiary want to do that business? Is that is that what they is that what they want to do? Uh should the business be sold prior to death or or you know, or what's that gonna look like? Because if someone doesn't want the business once the once the you know the original entrepreneur is gone, right, then then maybe they won't they won't care for it the same way. Maybe it maybe it ends up dissolving and you know, and being one of one of those cases.

SPEAKER_02 39:55

So the entity structure and the business continuation are not, and then you know, transfer planning with respect to the business and all of that. Cause that that's where, you know, I think it's important to know that's where we would all get involved too, where it's like we identify this potentially, or maybe one of you do, and then, you know, understanding the structure of the entity and then you understand the tax ramifications. And this is where it's like, okay, well, maybe the benefit, you know, the heirs will get the assets from it, but is it actually the business, or can you have like life insurance in place, for example, to help buy out the heirs so it maybe goes to the employee? So having that secession planning is huge, or understanding what happens to it at that point. That's that's a that's a whole nother topic, too.

SPEAKER_04 40:36

Usually beneficiaries don't want timeshares. I will say that. That's something that don't that um is they they're left with that and it's a huge headache. Businesses, maybe hey, they they they could put timeshares. Um time share, oh interesting. Yeah, they're not they're not fun for beneficiaries to deal with.

SPEAKER_02 40:52

Or or people while they're alive, I feel like it's like that's it feels like it's always a problem. And so it's like you got to sit through this thing, and then I don't know. So, you know, just just but go on vacation. I don't know. Um, so

Questions To Ask Your Whole Team

SPEAKER_02 41:05

so really in summary, I think there's a really good list of questions that as a listener and a client, you should ask your professional team. Um, so really questions for the attorney, I would think, you know, do my documents reflect my current wishes and family situation? Are my powers of attorney and healthcare directives up to date? Should my assets be titled differently to align with my plan? Questions to ask your CPA could be things like what tax issues should I consider before making gifts or changing ownership? How could my estate plan affect my errors from an income tax perspective? And are they any are there any upcoming tax law changes I should be aware of, which that's probably ongoing anyway? And every time something comes out, we're digesting that or trying to. Um, and then maybe questions for your financial advisor. Do your beneficiaries match your estate plan? Um, and that's something, of course, that's a that's a something that overlaps as well. Will my surviving spouse or heirs have enough liquidity? So that's a huge thing. Cause if we're talking about doing charitable giving or what have you, you know, what what does it look like if if I pass away? And does my financial plan support my legacy goals? So, so really a question for the whole team, I would think, are all of you working from the same assumptions? So making sure that, you know, your advisor, your CPA, your estate planning attorney are all working from, you know, the same the same assumptions and we all know what's on the same page. Um so really, you know, I guess in in closing, you know, when do you feel that an estate plan should be reviewed?

How Often To Review And Next Steps

SPEAKER_04 42:45

Every three years, I would say. Unless there's a change. If there's a major life event, that that's a signal to to get everything reviewed, but but and I'll tell clients, listen, i if you just want to call me up and you just don't understand what your documents say, I'm I'm happy to prepare a a review for you. Um I think it's a it's a good idea to just to know know what you have if if the worst thing happens.

SPEAKER_05 43:04

Mm-hmm. Well that's actually a question for you, uh Rune. Uh is there like a do you generally provide like a summary or anything like that for for people on what you know what their plan is? Because if they have a if they have a summary, not not a full you know, a state plan and will, but if they have a summary of the thing, like all the documents, then this binder, it's hard to like digest. And then it, you know, yeah, it takes you just you know hours upon hours to figure out what's going on. But but if you have a summary, you can look at it you know periodically. I mean, you know, three years sounds reasonable. I don't have a time frame in mind, but but um definitely periodically don't don't just go you know a decade without looking at something. Uh especially, I mean, if you have um you know named uh charities, I mean, is the charity still around? You know, has it has it merged? Are they do they still um do they still have the same values that the charity had when you wanted to give them in the first place? So so lots to go, uh lots of aspects to look at, but but definitely um you know, outside of of uh you know big events where you know that you know uh that you need to change something, such as marriage, divorce, uh you know, birth of children or or whatever it may be, um, you know, just periodically review um the that that summary and and make sure it's still online. And uh, you know, that that you know, it could take 10 minutes, it could take a half hour, you know, do it over coffee or lunch, and then uh and then you know you can put it away for a period again.

SPEAKER_02 44:19

Absolutely. No. Um I I agree with you. And you know, we we we try to review it as we do review it as well, and so every couple of years or when something changes, but no, it's great. I I'm I'm so glad we got to do this together. I hope we get to do more together. I would love to do one on like trust or something, that would be fun. But um, you know, it's so important to have these connections and work together and you know, it's invaluable relationships to be able to work with clients together and be able to trust each other and help each other. And so I just I appreciate both of you coming this morning and doing this. Um, and and you know, if you if you want to reach a rune, we we have, you know, a state planning attorney, we have a link to his website there and also for you, Jordan, um, a link to the website for uh Jones and Cold there. Um, so if you want to reach out to them to ask questions or, you know, to work with them, you certainly can. But thanks for listening to today's episode. And if you're interested in learning more about wiser wealth management or want to schedule a consultation to meet with one of our fiduciary financial advisors, you can do so by going to wiserinvestor.com or you can click on the link in the episode notes. We'll see you next week.

SPEAKER_00 45:28

Thanks for listening to a Wiser Retirement Podcast. We hope you enjoyed today's episode. Make sure to subscribe wherever you're listening. That way you don't miss any new episodes. We'd also appreciate if you could leave a rating and review. If you have any questions about anything that was discussed today, head to wiserinvestor.com and reach out. This podcast is strictly for informational purposes only and is not to be considered as investment advice or solicitation to buy or sell any financial products, securities, digital assets, or any other investment vehicle, or basis to make any financial decisions. Wiser Wealth Management Incorporated is a registered investor advisor with the SEC. The host and or guest may personally own securities, digital assets, or other investment vehicles mentioned on this podcast. Neither the host nor guest of the show are compensated for their participation, and no referral fees are paid to or received by any host or guest for clients, listeners, or similar interests. Investments involve risk, and unless otherwise stated are not guaranteed, be sure to first consult with a qualified financial advisor, tax professional, insurance professional, andor legal professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.